I know this isn't a strictly financial topic, but I can't resist writing about it from time to time. I often think about starting a third career trying to reform health care. Sometimes it is so embarrassing to be part of it. To make matters worse, both major political parties keep missing the forest for the trees. They focus so much on insurance reform that they forget that the problem isn't insurance, it's health care. I was reminded of this as I received my annual health insurance renewal in November of last year. We buy our health insurance on the open market and, as you might expect, receive no subsidy or employer assistance. Our premiums for 2018 are 13% higher than 2017 ($1345/month including dental if you care.) That's okay, our deductible went up even more – 16%. (Yes, that's sarcasm.) Our out of pocket max went up and our prescription coverage got worse to boot.

I understand why people are mad at the health insurance companies–the insurance companies are the ones you write the checks to.  They're the face of a health care system with runaway costs. But they're only that. The face. The symptom, not the disease. The disease is that health care spending is way, way out of control. So naturally, the next place you look is to the providers of health care–the doctors and hospitals and drug companies. If they wouldn't charge so much for that health care, we wouldn't spend so much on it, right?

While health care reform is complex (and anyone who thinks the solution is simple doesn't understand the problem), only a small part of the problem lies with the insurance companies, the doctors, the hospitals, and the drug companies, who are really just doing what they are incentivized to do as any rational economist would expect. The main part of the problem, dear patient, lies with you. “What?! How can that be?”, you say to yourself. Let me explain, and when I get to the end, I think you'll agree that the patient himself shares a large part of the blame, if not all of it. The rest of this post will discuss the four keys to fixing the US health care system, but an almost subconscious theme of it will be that nobody here is innocent.

4 Keys to Fixing Healthcare

# 1 Effectiveness Transparency

Problem number one with our healthcare system is that we consume a whole lot of health care that doesn't do any good. Yup. That's right. There are a whole lot of health problems that modern Western medicine simply doesn't have a good answer for. Sometimes we can't even treat the symptoms effectively, must less cure it. A while back I wrote about the importance of understanding the concept of the Number Needed to Treat (NNT). That's the number of people who actually need to take a treatment or have a test done in order to help one person. For most medical therapies and tests, that number is NOT a single digit. That's right. You have to treat more than 10 people in order to help one of them. For some therapies, that number is over 100. Sometimes it is infinite. There is a number needed to harm (NNH) for every test and treatment too. And that number is often lower than the NNT.

What does that mean? That means 90% or more of the healthcare we engage in is unnecessary. People like to blame emergency departments for unnecessary care (even though emergency care is less than 2% of the healthcare dollar.) But the truth is that EVERYBODY is engaging in unnecessary care. Physicians, hospitals, drug companies, device companies. You name it. We're all guilty. But so are the patients. Since healthcare, like everything else in this country, is a business, you can't place all the blame on those who provide goods and services when you can't resist buying them. I see the silly stuff you're coming into the ED for. I can't imagine the silly stuff you're seeing neurology, orthopedics, gynecology, and your primary doctor for. And that doesn't include all the nonsense you're paying cash for outside the Western medical system. We have a serious problem with health care overconsumption. Take a look at your 85-year-old relative on 25 meds if you don't believe me.  Think of all the appointments, tests, and pharmacy visits required to keep that list of medications going month after month after month, not to mention the hospitalizations required to treat the interactions.

Doctors and patients need to have A LOT more conversations about whether to do a test or treatment. About what the NNT and the NNH really are for each of them. For those things that we don't know how well they work, we need to focus our limited research dollars there.

But wait, there's more. We're spending a ton of money on stuff that is even LESS EFFECTIVE than western medicine. You think the data is bad on drugs and surgeries and x-rays? Wait until you see the data on chiropractic and essential oils.

For sure there are aspects of Western medicine that are incredibly effective and have helped us to reduce morbidity and mortality. But you might be surprised how few and far between super effective things like clean water, vaccines, insulin, seat belts, and surgery for necrotic bowel really are. Government, doctors, hospitals, and patients all have a role here in really looking at what is effective and what isn't. If we can simply drop the ineffective stuff and most of the barely effective stuff, we can dramatically decrease the cost of health care.

# 2 Price Transparency

Imagine going to a restaurant and ordering a meal off a menu without prices. You then walk out of the restaurant without paying any money. Six weeks later, the bill is sent to your “restaurant insurance” company. Six weeks after that, the insurance company sends you a bill for your portion of the meal. Crazy, right? You don't even remember what you ate 3 months ago. If we're going to have health care be a business in this country (and having worked in socialized medicine, I don't necessarily think that's a bad idea) you have to have a functioning market. And guess what you need for a functioning market? That's right. Prices. You need to know the price of stuff. Both patients and doctors. You want to bring down the cost of health care? You want to see what competition and a true market can do to reduce costs? Mandate that every health care provider in the country post its prices in the waiting room and on the internet.

Now I know it's complicated. You don't exactly know what a patient is going to need when they check in to the ED or show up in clinic. But you can post averages. You can post the price of common tests and treatments. You can post a sample bill for your most common complaints. As it is right now, even a savvy consumer (or a savvy doctor) has no idea what the price of anything is. Doctors, hospitals, pharmacies, and drug companies are all incentivized to make this as opaque as possible. Nobody is going to post their prices unless consumers (probably through their government) force them to do so. But you can't have a market without prices. And I'm not talking about chargemaster prices. I'm talking about the real prices. It's ridiculous that every patient has a different price list. It's amazing how much the price can come down when insurance is taken out of the equation. I drive by an outpatient plastic surgery center every day and they have a big flashing billboard- “Saline $4800, Silicone $5800.” LASIK surgery is similar. Concierge clinics have proven effective in some specialties, but surely we can come up with a system where we can have both insurance coverage AND price transparency.

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# 3 Skin In the Game

The other factor required for a market solution to bring down health care costs is skin in the game. When you're spending someone else's money, you're far more likely to overspend. Too many health care consumers in our country don't have enough skin in the game. They're on Medicaid, or Medicare, or Tricare, or VA care, or a plan subsidized by their employer. Or perhaps most of the cost of it is covered by the taxpayer through PPACA tax subsidies.

My family buys our own health insurance on the open market, but we are a tiny minority- just 16%. It's not that I'm against insurance, even insurance run by the government. But people need a meaningful amount of skin in the game in order to have a functioning market. Even having to pay $100 for that MRI is going to make most people think twice about it. If Levaquin costs you $75 and Cipro costs you $4, you might rationally conclude that you'd rather take the whole family to the movies twice and have to take Cipro twice a day instead of Levaquin once a day. But if they're both $10 after the prescriptions get “run through insurance” what do you care? You don't.

I had a patient the other day who I shocked out of a-fib after he came off a cruise and flew across the country to see me. He didn't have health insurance because it was too expensive. Yes, that's right. He can afford a cruise and airfare, but not health insurance. I didn't entirely fault him. He had made a rational decision that he'd rather go on several awesome vacations a year than have health insurance. When people have skin in the game, they can make rational economic decisions. An MRI or a used car? Knee replacements or taking the extended family on a cruise to Alaska? An expensive arthritis drug or living in twice as nice of a house? Chronic suboxone treatment or a live-in masseuse for your fibromyalgia? You could do this all day, and when people do, they will spend less on health care.

This is actually the area where recent healthcare changes have had the most effect. This trend toward higher deductibles has made many of us reconsider how we want to spend our dollars. But there has to be a middle ground somewhere between $3 ER Medicaid co-pays and $8,000 annual deductibles.

# 4 Death Panels

There, I said it. I'm a huge fan of death panels. In fact, nearly everybody I know who works in health care is a fan of death panels. They get a bad rap, of course, but they exist all over the world. A death panel is simply a group of dispassionate professionals who look at various tests and treatments in various medical scenarios and decide whether they should be allowed or not. It breaks our hearts to hear “no more should be done,” especially when it's our beloved grandma on the vent or a 23 week million dollar preemie. We hear about the miracles and say “there is no price too high for life.” Well, guess what? That's not true. Want to know what a life is worth? Check out the latest round of malpractice awards. Most of our lives are worth less than policy limits (generally $1 Million.) And if the number needed to treat to put grandma on a vent for a month is 200, and it costs $100K, well, you can do the math. We're saying Grandma is worth way more than any reasonable jury would indicate.

But it's not just the hard ICU decisions that the death panel would make. It's also what symptoms or signs are required to get an MRI. It's what drugs can be on the national formulary. It's which patients get chemo. Which patients get a trauma activation. Which patients qualify for an ambulance transfer. Nobody likes a committee getting between a doctor and her patient, but guess what? Doctors aren't very good at saying no, especially when it affects their paycheck.

“But we don't want to ration care,” you say. Don't kid yourself. We already ration care. We do it all the time. Usually by what type of insurance a patient has or how much money they have. What do you think insurance pre-qualification is all about? Do you really want the insurance company or your wallet functioning as your death panel rather than a committee of docs guided by the data? “I see everybody,” you say. Try calling your front desk sometime and pretend you're a patient without insurance and try to book an appointment. See how that goes.

The death panel could also get involved in malpractice situations. There are plenty of guidelines out there for doctors to follow, but there is no back-up for the doctor who does less (per the guidelines) and then suffers the inevitable bad outcome. She still gets drug through court for 5 years. It would be far better to have a “No-fault” system where those who are harmed are compensated whether there was an error or not and the frivolous 85% or so of lawsuits never get filed. And instead of having attorneys and courts police the medical profession, the death panel can do it. Everybody already hates them anyway.

While I'm on this rant, let's talk about the whole “healthcare is a right,” thing. What a ridiculous bit of poppycock. You can't go to the store and get food without having to pay, no matter how hungry you are. You can't go to a hotel and sleep in their beds without having to pay, no matter how tired you are. If we don't have a right to food or shelter, why would we have a right to healthcare? That doesn't mean that government doesn't have a responsibility to its least fortunate citizens to provide some basic level of necessary health care just like food and shelter. But doctors, hospitals, and pharma companies seem to only recognize one level of healthcare without regard to the patient's ability to pay. It sounds super noble, I know, but it becomes much less noble once you bankrupt the patient. “First do no harm” applies to their wallet too. The death panels can determine what that basic level of health care looks like, and if people want to get the deluxe version, they can go without $1,000 iPhones and cruises to get it.

health care reformHealthcare reform is a huge, complex problem. We're all part of it–government, healthcare providers, and patients. But if we want to bring down the cost, the best way to do so is to consume less healthcare. These four keys will help us to do that.

What do you think? Do you agree these are the four keys to bringing down the cost of healthcare? What would you add or take away? Comment below, but avoid inflammatory and ad hominem statements and references to political parties and figures if you wish your comment to still be there when you come back.